We have an account with two account owners. One of the account owners had an account at another bank and wrote checks payable to the 2nd account holder who deposited them here into their joint account.

The checks have been returned "account closed". Am I correct that this is a violation of the law? Who do I need to report to the police and the criminal....both of them?

You need to investigate. Based only what what you have said so far, it sounds like you may be reporting both.

Check your state law and consult with your friendly detective.

Of course, there could also be a plausible explanation for this. Account holder at other bank closed their account due to a lost or stolen checkbook, or identity theft. The checks were written prior to the account closing, and your account holder held them for a period of time (days or weeks after date written). Not saying this is the case, but I have seen that happen. It is my experience that it is easier to clean up the mess by closing the account, and worrying about the legitimate items that were outstanding when they come in.

Based on what little info you provided above, I have no way of telling if this is what may have happened. Then again, it could be fraud. You do need to investigate, starting with your customer. I'm assuming you have already charged the account for the items that were NSF, or were the funds already gone?